#188 More Equal than you Think

The Christian Economist | Dave Arnott

American incomes are 3% more equal today than in 1947. That was the key data point from former Senator Phil Gramm’s recent speech about his new book, titled The Myth of American Inequality. Don’t Covet Just about every discussion that points out inequalities of outcomes is a violation of the tenth commandment against covetousness. From Thomas Picketty’s books and speeches to Black Lives Matter to President Biden: The message is always rooted in wanting what others have. That’s why when Sergiy Saydometov and I wrote the book Biblical Economic Policy, one of the ten Biblical Commandments of Economics we found was “Don’t Covet.” It’s so pervasive in our society. As I’m recording this podcast, the Union of Auto Workers is out on strike. Guess what their major talking point is: How rich the executives are. Who barred a production worker from seeking a C-Suite job? In fact, companies typically provide tuition assistance for those who desire to move “up” within the company. If any of the automakers discriminated against a qualified executive, their competitors would snatch her up in a second, seeking competitive advantage over the others. That’s the beauty of competition. When you discriminate in a competitive environment, you hurt yourself. The union toadies also use the phrase “fair shares.” That’s straight out of Ayn Rand’s book Atlas Shrugged. She does not use the term in a favorable way. Quintiles OK, anytime you talk about incomes, you have to use quintiles. That’s because the Census Bureau reports incomes in five different levels. Here’s the raw data point that the coveters trot out: The top quintile makes 16.7 times more than the bottom quintile. But that’s before you count transfers. A transfer is money that is taken from the folks in the top quintile and given to the bottom quintile. After transfers, the ratio is 4: 1. That’s actually a very narrow difference. I mean really, what would you like it to be? Another shocking fact from Senator Gramm, “In 2017 the bottom quintile spent TWICE what they earned. Hold it. As my friend says, “That don’t pencil out.” Where did the extra money come from? Well, people in the top quintile spent 40% less than they earned. Oh, now it makes sense. It was transferred from the rich to the poor. The Census Bureau data does not count 100 federal transfer programs. It overlooks 2/3 of transfer income. 88% of income to the bottom quintile is not counted. Now you see why the real ratio is 4:1. There are lies, damned lies, and government statistics. Oh, Senator Gramm’s speech that I’ve been quoting was sponsored by a think tank called the Institute for Policy Innovation. It was founded by then speaker of the house Dick Armey, for the expressed purpose of producing reliable data. The Wrong Motivations Back to those transfers: They instigate the wrong motives in both parties. When you take money from rich folks, you motivate them to produce less. When you give money to the poor, you motivate them NOT to produce more. Production is the key driver of a nation’s wealth. The more you transfer, the poorer the nation gets. One of my favorite phrases is “Policies that Promote Production is what separates rich from poor nations.” Here’s how Winston Churchill said, “You don’t make the poor rich by making the rich poor.” The Dave Arnott extension of that is: When you make the rich poor, you make the poor, poorer. Ronald Reagan quipped, “We fought a war on poverty, and poverty won.” The war on poverty ended up being a war on the economy. Poverty was reduced by 50% between 1945-1960. That was BEFORE the war on poverty. THEN LBJ launched the “war on poverty” and it has not changed significantly since. The poverty rate without transfers ranges from about 11-16%. When you count the transfers received by those in poverty, only 2.5% are still qualified as being in poverty. And, again, a reasonable person wants to ask: What is an accepta...